IDEAS home Printed from
   My bibliography  Save this article

Early Warning to Insolvency in the Pension Fund: The French Case


  • Noël Bonneuil

    () (Institut mational d'études démographiques, 133, bld Davout, 75980, Paris cedex 20, France
    Ecole des hautes études en sciences sociales, 190 Avenue de France, F—75013 Paris, France)


The financial equilibrium of pension funds relies on the appropriate computation of retirement benefits, taking account of future payments and discount rates. Short-term errors in the commitment for retirement benefits, ill-suited investment in the stock market, or improper mixture with pay-as-you-go payments have long-term consequences and may lead the pension fund to insolvency. The differential equation governing the current assets shows the respective weights associated with the error on the interest rate, the error on the extra bonus, and the error made in forecasting mortality. These weights are estimated through simulations. A short follow-up is sufficient to estimate the three errors. A threshold for the extra interest rate to be earned on the financial market is given to counter-balance the extra bonus when mortality is forecast correctly.

Suggested Citation

  • Noël Bonneuil, 2013. "Early Warning to Insolvency in the Pension Fund: The French Case," Risks, MDPI, Open Access Journal, vol. 1(1), pages 1-13, January.
  • Handle: RePEc:gam:jrisks:v:1:y:2013:i:1:p:1-13:d:22969

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Gollier, Christian, 2008. "Intergenerational risk-sharing and risk-taking of a pension fund," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1463-1485, June.
    2. Møller,Thomas & Steffensen,Mogens, 2007. "Market-Valuation Methods in Life and Pension Insurance," Cambridge Books, Cambridge University Press, number 9780521868778, April.
    3. Ponds, Eduard H. M., 2003. "Pension funds and value-based generational accounting," Journal of Pension Economics and Finance, Cambridge University Press, vol. 2(03), pages 295-325, November.
    4. Blake, David, 1998. "Pension schemes as options on pension fund assets: implications for pension fund management," Insurance: Mathematics and Economics, Elsevier, vol. 23(3), pages 263-286, December.
    5. Bowers, Newton Jr. & Hickman, James C. & Nesbitt, Cecil J., 1982. "Notes on the dynamics of pension funding," Insurance: Mathematics and Economics, Elsevier, vol. 1(4), pages 261-270, October.
    6. Campbell, John Y. & Viceira, Luis M., 2002. "Strategic Asset Allocation: Portfolio Choice for Long-Term Investors," OUP Catalogue, Oxford University Press, number 9780198296942.
    Full references (including those not matched with items on IDEAS)

    More about this item


    pension funding; retirement benefits; control differential equation; misestimation of mortality;

    JEL classification:

    • C - Mathematical and Quantitative Methods
    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • K2 - Law and Economics - - Regulation and Business Law


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jrisks:v:1:y:2013:i:1:p:1-13:d:22969. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (XML Conversion Team). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.